Governance framework

Government Pension Fund Global (GPFG)

The Storting has, in the Government Pension Fund Act, accorded the Ministry of Finance formal responsibility for the management of the Fund. Operational management of the Government Pension Fund Global (GPFG) is carried out by Norges Bank.

GPFG governance framework

The Ministry has issued provisions on Norges Bank's management of the GPFG in a separate mandate. The mandate describes the general investment framework for the Fund and stipulates requirements with regard to risk management, reporting and responsible management.

The governance structure must ensure that key risk and return decisions, as well as decisions regarding the responsible investment framework, are endorsed by the Storting. At the same time, there must be sufficient delegation of authority to ensure that operational management decisions are made close to the markets in which the Fund is invested. Norges Bank may deviate somewhat from the benchmark index in their operational management og the GPFG, within risk limits stipulated in the mandate. 

Governance hierarchy

The management of the GPFG is based on a governance structure in which the Storting, the Ministry of Finance, Norges Bank's executive board and Norges Bank Investment Management (NBIM) have different roles and responsibilities. Sound control and supervisory bodies are in place at all management levels of the Fund. Regulations and delegation authorisations will necessarily be more detailed further down the pyramid.

The governance structure of the Government Pension Fund Global (GPFG) was reviewed in connection with the preparation of the current Central Bank Act, which entered into force on 1 January 2020, cf. Prop. 97 L (2018-2019); Act relating to Norges Bank and the Monetary System, etc. (Central Bank Act), and Meld. St. 7 (2018-2019); Regarding a New Central Bank Act.

As the supreme executive body of Norges Bank, the Executive Board is responsible for the Bank's management of the GPFG. The Executive Board of Norges Bank is comprised of the Governor, the two Deputy Governors and six external Board members. The Governor is the Chair of the Board. All Board members are appointed by the Government (the King in Council), which also designates one of the two Deputy Governors as the Deputy Chair of the Board. The Governor and the two Deputy Governors are appointed for a fixed term of six years, which may be extended for up to another six years, while the external Board members are appointed for four years at a time. The maximum appointment period for the Board members is 12 years. For administrative matters, the Executive Board also includes two representatives appointed by and from among the employees.

The Executive Board is responsible for the overall operations of Norges Bank, including all administrative matters, as well as any central banking matters not assigned to the Monetary Policy and Financial Stability Committee. With the exception of any duties assigned to the Committee by or pursuant to statute, the powers and responsibilities of the Executive Board extend to all aspects and duties of the Bank, including the management, control and follow-up of the operational implementation of GPFG investment mandate, the foreign exchange reserves, the payment system and the settlement system, as well as the collateralisation of loans, etc.

The members of the Executive Board are not subject to any formal statutory expertise requirement. However, the Ministry of Finance stated the following in Meld. St. 7 (2018-2019): "Furthermore, the Executive Board of Norges Bank shall ensure the proper organisation and structure of Norges Bank, including the operational management of the GPFG. The Board shall also follow up on overall plans for the Bank and ensure that the Bank is subject to good governance and controls. An important function of the Board is to challenge Bank executives in matters presented to the Board. The possession of relevant expertise is one of several criteria that need to be met in order for the governing bodies to serve their function. The establishment of the Monetary Policy and Financial Stability Committee means that the expertise of the Executive Board may be tailored to the responsibility of managing the GPFG and the other central banking duties, while the expertise of the Committee may be focused on monetary policy and macroeconomics. The expertise and composition of the Executive Board may to a greater extent be oriented towards specialised expertise in investment management and the measurement, management and control of risk, as well as responsible investment practice insight. In addition, the Executive Board needs to be in possession of a general understanding of society, including an understanding of the division of responsibilities and roles between the Executive Board and political authorities. It is crucial for both the governing bodies and the executives entrusted with GPFG investment management to have a robust understanding of Norwegian society, a firm understanding of their role, as well as loyalty to the Fund owner, represented by the Storting and the Government. [...]” The Storting endorsed these assessments, cf. Innst. 165 S (2018-2019). The Ministry examines the expertise of the Executive Board in relation to the overall expertise requirements on an annual basis.

The Board remuneration is assessed and determined annually by the Ministry of Finance. Such assessment takes place in the wake of the central government wage settlement. The remuneration shall reflect responsibility, expertise, time use and complexity, while also ensuring Board member recruitment.